Krzysztof Cibor
30 December 2014

POLAND. Country profile

General context (definition, recognition)

The social economy sector in Poland has a long history (first consumers cooperatives were established in mid-19th century) but survived strong crisis after II World War (nationalization of coop movement) and during the economic transformation after 1989 (strong attitude to private, not cooperative ownership).

The current social economy movement is not strong enough to be an important partner for both public and private entities. For example there is no national federation of social enterprise nor important local or sectorial federations. Only workers cooperatives have strong national level federation, but this is not powerful enough to be – for example – member of tripartite commission nor to have strong impact for the legislative process.

Nevertheless in the recent years the stress has been laid on the development of the sector, mainly using public funding, including the funds from the European Social Fund under the Operational Programme Human Capital (PO KL). In 2007-2013 many institutions and projects assisting entities or individuals tending to establish social enterprises and promoting the idea of social economy (i.e. social economy support centers - OWES) have been created thanks to the possibility of financing from the EU structural fund. At the same time the number of social enterprises has increased with and without support of the European funding.

There is now specific legal form for social enterprise. There are many different definitions of social enterprise in Poland. One of them was formulated when drafting the Social Enterprises Act (not adapted yet – January 2015). According to that definition a social enterprise is a small-medium size enterprise of a various legal form, which give an employment for people from disadvantaged group (at least 50% of all posts) or is providing public interest service, one of the described in the bill.

One of the most recognizable form of social entrepreneurship is a social cooperative. The social cooperative is relatively new legal form. It was implemented by Polish law in 2006. There are more than 1200 social coops registered in Poland, almost all of them are micro enterprises (below 10 employees). They are operating merely on local markets. The social cooperative should be an enterprise set up by 5-50 people or by at least two legal persons (NGOs or public authority) and have to employ mostly people from disadvantage group.

There are many NGO’s (associations and foundations), which are perceived as a part of social economy (especially those of them, which employ people and have any form of economic activity).

Another, yet rather marginal legal forms perceived as social enterprises are Vocational Activity Entity (where people with severe disabilities are employed) and non for profit companies with limited liabilities.

The level of understanding of socially responsible purchases is very low among both public and private customers. Public authorities are rarely keen enough to perform in an innovative way. They are bond by restrictively understood procedures.

Since the second half of 2014 the National Program of Social Economy Development (KPRES), a set of guidelines determining the directions of the sector development and designing the support mechanism is adapted by government.

The challenges faced by social economy sector in Poland are to:

  • define and legitimize the social enterprise status

  • introduce appropriate instruments and mechanisms supporting social economy entities, facilitating economization of their activity and surviving on the market

  • build a sustainable model of cooperation of the social economy sector players

  • promote and increase the notion of the social economy in the society

Support infrastructure

Within the frames of an ESF-funded project called Integrated system of social economy support (ZWES, 2009-2014), there was an effort to build a sustainable network of institutions, offering standardized and comprehensive support for the social economy sector.

The core of the system are the bunch of OWES (Social economy support centers). About 100 of them were active all over the country at the end of 2014, but their amount dynamically decreased by the beginning of 2015, as they were funded from ESF 2007-2014 financial perspective.

They are expected to provide a wide range of advisory and consulting services, supporting entrepreneurs, advising on existing sources of financing and assisting in applying for financing.

They don't have a legal status as for now. Providers are mostly NGOs, but also private business or high schools and public administration. OWESes have been established as projects financed by the Operational Programme Human Capital, ESF (beneficiaries are not participating financially to the services provided). The centers are for that reason limited in terms of amount of beneficiaries as well as of the period of activity (about 2 years).

To assess the supporting initiatives and activities in the field of social economy an external evaluation was performed in 2013 by Coffey International Development for the Ministry of Regional Development.

The report on “Assessment of support in the area of social economy granted using financing from the European Social Fund within the Human Capital Operational Programme” confirms that most of the activities for the development of social economy were mainly financed by the Structural Funds.

Despite numerous measures and undertaken actions, the level of development of the sector is unsatisfactory. Employment in the sector has reached 3.7% in Poland compared to the European average of 6%. According to the assessment, the social economy support under the PO KL failed to build an effective and sustainable social economy infrastructure. Especially in the first stage, OWES were not fully prepared to professionally realize their tasks. However, there is a number of successful OWES which are recommended as partners for future development.

The OWESes are going to be finances in the similar way within the financial perspective 2014-2020, although the managing of the big part of ESF money will be set up on regional level, which could cause some substantial differences of support system policy among regions. To guarantee the appropriate level of standards, the certification comitee was established in 2014 and produce a set of guidelines which should be fulfilled by entities which want to provide OWES for the current period.

Support centers are also mentioned in National Strategy for Development of Social Economy as well as in draft of Social Entrepreneurship Act.

Apart of ESF-funded support centers there are some projects funded by national money (Fundusz Inicjatyw Obywatelskich), provided mostly by NGOs and social cooperatives, which aim is to create new social cooperatives and promote them. For the funding and projects' durations are strongly limited, the idea doesn't create any sustainable system.

There used to be at least three universities providing courses on social economy on a post-MA level - Warsaw University, Krakow Economic University, Poznań Economic University. They were financed by ESF money. They had rather theoretical approach to the issue.

The traditional sectorial help and support was provided by workers coop federation (ZLSP).

During the last years there were some new, private or social initiatives focused on supporting social entrepreneurs, independent from public funding. One of them is NESsT, international organization financed in Poland by JP Morgan, which provides advisory and investments for about 12 social start-ups. NESsT have their own tutors but it uses also a number of business people from medium-level management of international corporations cooperating with the organization. Another initiative is Sieć Sensownego Biznesu (Network of Business with Sense) accelerating system, where social entrepreneurs and people willing to establish social enterprise are cooperating with businessmen and investors to grow up their social ideas. The similar but not permanent initiative was held in Warsaw in March 2014 as Waw City Hub as an informal network of social activists, entrepreneurs, business- and public administration-people. It is too early to predict any viable results of such initiatives, but they attracts different actors and have rather good media coverage.

The financial eco-system

The insufficient supply of funding for new businesses was identified as a major barrier for development of the social economy sector.

In the mainstream finance there are no special banking products for the social entrepreneurship sector in Poland. It might be explained by the specificity and the large diversity of the sector, which makes it difficult for commercial or co-operative banks to develop coherent criteria for the evaluation of non-governmental organizations, social cooperatives, labour cooperatives and other entities. At the same time the potential group of clients is not sufficiently large for the financial institutions to be inclined to prepare a separate risk methodology. Only large entities, such as foundations with high turnover can count on financing from banks. However, banks often offer them less favorable conditions than to the regular clients.

Cooperative banks have about 8% share in the market and are well recognized in Poland. There are more than 570 of them across the country (compared to 40 commercial banks), but they are also not geared to cooperation with the social economy sector. They do not offer special products for cooperatives, nor other social economy sector entities organized as cooperatives.

Today the Polish social finance market is composed of a few main types of instruments:

1) Public grants for social enterprise start-ups

2) Loans for social economy entities

3) Guarantees for social economy

Public grants available for the social economy entities (social cooperatives) are financed from the state budget (from the Labour Fund distributed by the regional labour offices - PUP) as well as from the ESF.

There are two commercial loan funds dedicated to supporting social economy entities, operating on a regular basis: PAFPIO financing nongovernmental organizations (offering loans at 12% interest rate, mainly to associations and foundations) and TISE financing all social economy entities, including social enterprises (interest rate of 9.5%). Both funds grant loans based on their internal risk assessment methodology and credit policy defining loans purpose, amounts, accepted collaterals.

Currently up to 2015 (depending on the funds available) TISE provides preferential financing for social enterprises within the framework of the social economy pilot program (financed from ESF and managed by BGK). The total facility size is app. PLN 25 M. Only microloans (up to PLN 100 K) for investment or job creating purpose are granted to the social economy entities running business activity for at least 12 months.

Małopolski Fundusz Ekonomii Społecznej is a foundation established to support the development of the non-governmental organizations and social enterprises by providing loans and guarantees. The founding members are: Fundacja Gospodarki i Administracji Publicznej (Foundation of Economy and Public Administration), TISE, Krakowski Bank Spółdzielczy (Co-operative bank in Kraków), Małopolska Agencja Rozwoju Regionalnego (Małopolska Regional Development Agency) and BGK (state-owned bank). During three years of the operation it has provided over 70 guarantees to the social economy entities.

Beside the financial instruments and players targeting the social economy that operate continuously, the financial eco-system is diversified from time to time by some small local initiatives such as pilot microloan and guarantee funds and first social venture capital fund. The aim of the project financed by the EU fund implemented by the Centre for Economic Development in Pasłęk is to develop and test a model of capital support (VC) in vocational integration. The project will consist of preparing people to lead social enterprises with a focus on return on capital (disinvestment) along with the profit generating by the social enterprises. The timeframe is August 2012 to August 2015. Under the pilot program the projects established by three groups of the young unemployed from the Warmińsko-mazurskie region will be financed.

There is an unsatisfied demand for products allowing 'to increase' the equity of social enterprises (i.e. subordinated debt, mezzanine). Despite an identified need for financing in form of capital, such a solution has not been included in the national strategy. On the Polish market there are no special financing instruments dedicated to the sector, no specialized funds, no form of crowd-funding nor social impact bonds.

In the new financial perspective the support for the social enterprises will be available within the mono fund operational programme (ESF) managed by the MIR (Ministry of Infrastructure and Development) and 16 multi fund regional operational programmes, supervised by the regional self-government authorities (Marshal Offices).

The aim of the investment priority 9.8. on social entrepreneurship and work integration in social enterprises within the new operational programme - PO WER (the national one) is the improvement of the conditions for the social economy development and the expected result is the strengthening of the economic performance of the social economy entities measured by the number of social economy entities whose economic performance has got improved after receiving the support from the ESF.

The total financial allocation of this investment priority is dedicated mostly to the policy coordination and issues like:

- Monitoring of the sector development, evaluation of its effectiveness;

- Development of the existing services’ standards, implementation and monitoring of standards;

- Development of legislation and education aimed at creation of favorable environment for social economy development;

- Certification of services provided by social economy entities and social enterprises;

- Promotion of social economy and social entrepreneurship (coordination of regional activities);

- Enhancing knowledge of stakeholders, public administration and local leaders with regard to the role of social economy;

- Building the networks of social economy entities and social enterprises; initiating the cooperation between social enterprises (and social economy entities) and local / regional government, business, academic centers, NGOs, including national and inter-regional clusters and social franchising;

- Subsidizing revolving financial instruments; building on the experience of the pilot ESF loan programme established in 2012, the new loan programme will be constructed. Additionally, the guarantee programme as well as other innovative financial instruments, such as social venture capital, will be developed. All the revolving financial instruments will be managed at the central level but implemented regionally (by the regional financial intermediary institutions). These instruments are addressed to the existing social economy entities to sustain and develop their economic activities.

The expected number of social economy entities which will benefit from the repayable financial instruments under the investment priority 9.8 is fixed at 1 313 (to be achieved by 2023).

A much larger pool of funds will be spent by individual governments at the regional level than in the previous period. Individual entities, including social enterprises will be supported under the regional operational programmes. Within the same investment priority (9.8) the regional authorities are going to implement the following types of activities:

- Subsidies for start-ups (not only social cooperatives as it was stated in 2007-2013 but also other legal forms)

- Vocational reintegration through the Social Integration Centre (CIS) and Social Integration Clubs (KIS)

- Development of the services of Social Economy Support Centres (OWES)

- Building the local / regional partnership for social economy development

Within another investment priority (9.3) in the regional operational programmes there are ERDF allocations foreseen for the subsidies for social enterprise infrastructure (introduction of new products and services accompanied by advisory support at the stage of business plan preparation and analysis of the market) and social enterprise incubators.

 Identity and visibility of social enterprises

a. EVIDENCE BASE

There is still lack of good evidence base of statistical (and equally viable) data about Polish social economy. However, first attempt to conduct systematic research of the Social Economy, Monitoring of Social Cooperatives or database of not-for-profit corporate organisations in TISE are signs of growing interest in the hard evidence data. Another movement is systematizing of the systemic and conceptual approaches through academic research and publishing (mainly done by ISP – Instytut Spraw Publicznych – Institute of Public Affairs).

Social Cooperatives are monitored by government (it is forced by the Soc Coop Act). The first monitoring contains data back to 2010-2011 and the recent one – 2012-2013.

Associations and Foudations are yearly surveyed by National Office for Statistics.

About 40 best practices in social economy could be found on the database managed by FISE (atlas.ekonomiaspoleczna.pl).

B. social impact measurement

Attractiveness of SROI brought the decision on elaborating Polish equivalent. The work was done by Kraków Economic Academy – School of Public Administration remains a study. Another attempt to establish Polish measurement technique for social enterprises was ProveIt PL tool provided by FRSO Foundation. Both tools aren’t very popular and don’t have a widespread audience. One of the reason is that the customers of social enterprises (both public and individual) don’t try to get more information of social impact made by enterprises, so they aren’t focused on searching of the method.

In parallel, attempts to calculate “costs of abandonment” (Mazowsze Region) and internal tool to evaluate projects for SE loans in TISE (Pilot project) were noticed. The debate on introducing the SROI or another measuring techniques appears to attract less attention than above-mentioned standards building for social assistance services, including social economy.

C. quality standards and brands/marks for social enterprise

There were a number of activities aiming at building the visibility and identity of social enterprises /social economy in Poland.

The social economy marks are provided by FISE and Foundation of Queen Jadwiga (Poznań), but they are both on a very beginning stage (about 20-30 mark-holders).

D. Promotion/communication

The main information channels about social economy in Poland are:

  • Internet with ekonomiaspoleczna.pl, and ngo.pl

  • Publishing, being extensive activity, widely supported by EU funds and projects

  • Meetings and conferences like OSES (annual national meetings of social economy) and its regional analogues.

  • National-wide competition for Social Enterprises (5th edition is going on this year) and its regional analogues.

 

This outline is based on the papers produced for SEN peer reviews by the Polish partners (Ministry of Infrastructure and Development, Ministry of Labour and Social Policy and FISE)

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